Intel Research - Exploratory Research - People and Practices ... -

The Next Ten Percent Enlace: http://www.intel.com/research/exploratory/papr/extending_the_reach-peru.htm
Lima and Cusco, Peru: Cabinas Publicas
(July 2002) "Cabinas publicas" (public booths or cabins) are independently owned, for-profit business that provide shared access to computing, communications and Internet connectivity to the public for a fee. Physically, the majority of cabinas occupy a small store front along the sidewalk. Most spaces appear to be rented, while a few of the spaces are owned by the operator (though these statistics are hard to come by). Most appear to have 10- 20 PCs (+/- 2) and connect to the Internet through one ADSL line shared among the 10 or so computers. (Telefonica, the phone company permits up to 10-12 machines per line). The largest cabina we saw had 40 machines, which was a very large cabina. For many people, cabinas are the only place where they can access the Internet and make long distance phone calls using voice over the Internet. Even people with phone service will often go to their local cabina to make long distance Internet telephone calls because of the price difference. There are about 2000-3000 cabinas in Peru, most in Lima.

Cabinas publicas are interesting to us because they represent a model of shared access to information and communication technologies (ICTs) intended for the local population. They are typically not construed as "bars" or "cafes" or as places to go to "have a drink". And they tend not to be located in touristed areas, where one might find the more typical cyber café. The important point is that although cabinas and cyber cafes are not terribly dissimilar physically their inception and their ongoing use by the local population is actually quite different not apparent on first inspection.




As an example, one of the first locations outside of Lima to start cabinas was the tourist destination of Cuzco, at 11,000 feet in the Andes, and the base for many trekking expeditions to Machu Picchu and the surrounding Incan sites. There is also a large University in the town, about a mile from the center where the vast majority of tourists remain. There are 8 cabinas near the university that offer basic ICT access and service the university community as an extension of their reportedly inadequate university computing facilities. There are more than a dozen cyber cafes near the center offering not only access, but meals, drinks, music, entertainment, atmosphere and comfortable seating as a "place to hang out". Their prices are also considerably higher. Though they use the same ICT equipment, their operations and intent differ.

Cabinas were started with completely different intentions than cyber cafes. Jose Soriano was (and is) a social entrepreneur. He and colleagues conceived as the cabinas in two equal parts, but where one part was "more equal" than the other. The first was the important one: to develop the country and he saw ICT infrastructure and access by the people as a means of doing that. The second was to develop the physical network, which not only supports the first, but which also generates a foundation on which more can develop. Yet his first goal was to develop the country. As a result, he made decisions that one might question were his intentions to maximize profit.

For example, Cabinas proliferated because Mr. Soriano demonstrated a viable business model to individual entrepreneurs. He founded RCP (Red Cientifica Peruana – The Scientific Network of Peru), which then founded the first ISP in Peru. Rather than set up some sort of a franchise model or anything like that, he then offered free demonstration classes (live seminars) to wide audiences all around Lima that showed people step by step exactly how to set up a cabina and encouraged anyone who wanted to start one. RCP also had some of their own cabinas closely linked to itself in which classes were offered free of charge demonstrating how to use PCs and the Internet in their cabinas. As the then Vice-Minister for Communications of Peru said "A lot of people talk; a demonstration does a lot to show people something can be done."



Entrepreneurs were attracted to cabinas for several reasons, some of which are listed here. First, a cabina generates income for the entrepreneur immediately. Second, there was and is a relatively high unemployment rate, so a new idea that would generate income had immediate potential. Third, cabinas offered a "contained" business that could be operated completely by the entrepreneur for what is a large, but manageable investment of about US$10-14,000 (which is made back, on average, in about a year taking certain other considerations into account. In this way, one person told us that a cabina is "like a taxi" – a single investment with understandable and expected returns.) Fourth, the services offered in the cabinas - primarily communications such as email and voice over Internet - completed favorably with extant telephone company services satisfying an unmet need for cheap long distance communication. (Many Peruvians looking for work have migrated to Lima and from there many have emigrated to North America leaving family behind.) Fifth, cabinas also offer additional services that essentially "came for free" with access to the Internet, e.g., access to "free" software, movies, music and pornography were among the most popular items. Finally, and this should not be discounted, Mr. Soriano was among those rare actors who not only understood the needs of the local cabina entrepreneurs and how to communicate to them, but he also understood and had access to government and corporate resources, including the court system, as he needed; he thus bridged both worlds.

Another key issue is that most Cabinas appear to exist within the informal economy that comprises a significant portion of the overall Peruvian economy. While "informal economy" can mean many things, in this case, it refers to businesses are hidden from taxation and other formal measures of the economy. It also means that their use of licensable material is unchecked. Indeed, an entire "tech mart" (called "Wilson") has emerged in downtown Lima (only blocks from the Government Palace, Palacio de Gobierno) that sells all forms of electronics, computers, computer parts, software, movies, games, etc. Much – though certainly not all – of the hardware is refurbished or even retrofitted, e.g., reloaded toner cartridges for printers. And much of the software and media is unofficial. One could, for example, purchase a selection of the latest Hollywood movies on CD (choice of format), e.g., Spiderman, for US $2.



Wilson (market)
While their "informal" existence offers certain advantages in the short term, there is some evidence that it also offers some long term disadvantages. For example, given their small size, each cabina is, according to one source, too small to be sued for copyright infringement and certainly too small to be charged with tax evasion. Yet, the cabina operators also cannot form any sorts of associations, they cannot learn from each other, they can’t form any consortia to develop knowledge or practices of common benefit. As another example, the limited barriers to entry for any one cabina means that anyone can start one, making for intense competition that has reduced margins to nearly zero, and driving many cabinas out of
business (turnover is reported – unofficially, of course – at 50% within 3 years). One upshot of this is that there is limited cash flow for reinvestment, for evolving the cabina, for growing it’s service offerings independent of an organization like RCP, which has not been had the same role it had previously for some years now.

In summary, this is one model of shared access that’s gained some purchase in Peru. Though there is turnover, though there is intense price competition, there’s also value for both the entrepreneurs and the customers. It’s important to note that many of the conditions that together combine to form a sufficiently fertile environment for these cabinas appear to be uniquely Peruvian, especially their inception and the goals of Mr. Soriano and RCP. Different places will most likely require different models. Two other examples we’ve studied include Hungarian Telecottages and Drishtee, a collaboration of the private and public sector in India.

With contributions from Alvaro Urrutia, Intel New Mexico.